Why are shipping costs from China so high?
Nowadays, shipping cost from China to other countries has immensely increased. Even the cheap ocean freight cost has become expensive, and the expensive air freight and express freight costs have gotten more expensive. The increase in the demand for consumer goods due to the Covid-19 pandemic lockdown and limited shipping capacity has culminated in the increase in shipping costs from China by over 350%. The increase in shipping costs has badly affected companies that depend on importing goods from these countries.
The high shipping cost was solely caused by the negative effect of the recent pandemic on the shipping industry and the lack of uniform timing for national lockdown imposition and implementation around the world. This resulted in an imbalance recovery and returned to normal economic activities.
Countries like China recovered earlier from the pandemic and returned to the factory for more production; however, most of the manufactured goods and the ones already on the ground before the pandemic couldn’t leave China. This is because most of China’s top trade partners like America and Europe have yet to lift their lockdown restrictions. This caused China manufacturers to remind stranded, causing the shipping rate to rise.
Also, the shortage of shipping containers caused by the lockdown restrictions has a lot to do with the increase in the shipping cost. The pandemic which distorted shipping routes and forced countries to impose lockdowns caused containers to get stuck in three possible places, resulting in a shortage of containers. Some containers are stuck in China’s top export destinations like US and EU and couldn’t be returning because of the pandemic. While some are stuck in China because manufacturing companies in China cannot export goods to EU or US ports forcing them to store the goods in available containers and portside until the lockdown is lifted in the West. And some containers are on ships diverted to serve the US and EU market in South Asia and Africa.
Additionally, the persistent increase in demand for consumer products due to the national lockdown restrictions couldn’t be addressed effectively due to limited shipping capacity. These, alongside no short time relief from the government, cause the shipping cost to soar massively.
Ultimately, the excess reliance on sea freight for shipping from China resulted in the problem of port congestion in China ports, cancellation, and delivery delay. This has made sea freight shipping costs increase like that of air freight, thus resulting in towering shipping costs from China. Regardless of the shipping mode, you decide to use; you have to pay more than the usual fee pre-Covid era. The surge in shipping prices has consequently increased import products prices.
When Will Sea Freight Rates Go Back To Normal?
According to recent data, freight costs are starting to fall on some of the world’s most popular shipping routes.
The spot rate for shipping a 40-foot container from China to Los Angeles has decreased by 51% in November, according to the South China Morning Post.
Drewry, a maritime consultant, warned the Loadstar that the supply chain crisis would not be resolved by the end of 2022. Although it anticipates spot rates to fall next year, it forecasts “a large increase in contract pricing, leading to a 6 percent increase in average global pricing.”
What can be done to counter rising freight rates?
One of the most efficient strategies to combat excessive freight charges is to organize shipments ahead of time. Every day, the cost of transporting goods rises. Companies must carefully plan their shipments long in advance to avoid paying surging charges and to take advantage of early-bird discounts. This can save them a significant amount of money and help them avoid delays. When planning ahead of time for a shipment, digital platforms can be used to utilize historical data on freight costs to estimate rates as well as patterns affecting rates.
In the shipping and logistics industry, technology has the potential to bring in a strategic shift. There is now a significant lack of visibility and transparency among ecosystem players. Re-inventing procedures, digitizing shared operations, and using collaborative technology can all help to increase efficiency and lower trade costs. Aside from strengthening supply chains, it will enable the sector to rely on data-driven insights, allowing participants to make more educated decisions. As a result, the industry must adapt technologically, resulting in a systemic transformation in how it functions and trades.